Tips to Protect Your Union’s Funds from Fraud

April 1, 2013
By Michael Fina, Vice President Union Affinity Manager, First Trade Union Bank

Did you know that, nationwide, organizations lose about 7% of their annual revenue to fraud?  In 2012 alone, the typical loss among organizations suffering a financial loss due to a payments fraud incident was $20,300.  All in all, check-related losses have been estimated to be greater than $1 billion in a given year.

While the popularity of Online Banking and online payments is increasing, paper checks remain the payment type most vulnerable to fraud attacks.  In a recent study conducted by the Association for Financial Professionals, 87% of organizations affected by fraud report that checks were targeted.  With this reality, are you doing all you can to mitigate the risk of fraud in your union’s funds? 

Failure to enforce internal controls or adopt commonly-used fraud defenses were the major reasons that organizations suffered financial losses from check fraud. One quarter of organizations attributed financial losses to their failure to reconcile accounts or return checks on a timely basis. Internal fraud caused by an employee, for example, was responsible for financial losses at two out of every five organizations.  Don’t let your union’s funds fall victim to fraud.

There are several services available to organizations that can help protect against payment and electronic fraud against your funds, including:

Positive Pay:Your organization provides your banking partner with an electronic file of check serial numbers, dollar amounts, check dates and payee names. The Bank then matches the serial numbers, dollar amounts and dates against your check issue file to determine which checks can be paid and which should be returned.

Reconciliation: The Bankprovides you with anelectronic file of check serial numbers, dollar amounts and check dates that have been paid so you can match them against your check issue file and electronically reconcile your accounts.

ACH Blocks/Filters:These enable you to notify your bank if ACH debits should not be allowed on certain accounts. With a block in place, no ACH debit (even one that is authorized) will be able to get through on a given account.

While more than 80% of companies reportedly employ these best practices to mitigate fraud, loss situations may also be due to a failure to follow internal fraud policies.  It is important to develop and/or modify internal business processes to alleviate potential risks by:


·      Not providing payment instructions by phone or fax.

·      Increasing the use of electronic payments.

·      Reconciling your bank accounts in a timely fashion.

·      Maintaining separate accounts for different payment methods (e.g., separate accounts for disbursement and collections and for ACH payments and checks).

Furthermore, many banks now offer advanced online security tools that provide an added layer of protection and authentication when accessing your union’s funds or making payments via Online Banking.  Be sure to talk with your banking partner about these and other solutions to ensure your funds are protected.

First Trade Union Bank is committed to providing financial services to protect your organization from fraud, as well as educational seminars on topics such as this.  First Trade is a union-owned community bank serving labor organizations and its member for more than 25 years. The Bank’s New York offices are located in New Hyde Park and Hauppauge.  Michael Fina, VP / Institutional Banking for First Trade, is responsible for generating new relationships with public and private sector unions throughout New York State and can be reached at 516.874.9601 or mfina@ftub.com.

April 1, 2013

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